For the first time since records have been kept, from 2009 until now, the wealth of the upper 1% has gone dramatically higher while the wealth of the lower 90% has declined.
Chart Shows Real Average Wealth of Bottom 90 Percent and Top 1 Percent Families.
What do you see in that chart that does not fit, that has never happened before?
For 70 years we know of and probably for the entire history of America there has never been a period when the wealth of the upper 1% of Americans, wealth wise, has gone up without the wealth of the lower 90% going up also. That is until now. We are inserting a larger version of this chart here:
What the chart shows is that on the left side is the family wealth adjusted for inflation for the lower 90% of Americans wealth wise. It should be kept in mind the word “lower” does not mean poverty. 0 to 90th percentile in income is $0 to $145,000 per year. On the right scale is the upper 1% wealth wise, at about $14,000,000 of net worth. The average wealth of the lower 90% is about $8,500 or about where it was half way through the Reagan years, 30 years ago. This is a major reversal of the trend of higher wealth for all Americans for over 200 years. In 2006 the average wealth of the lower 90% was $13,000 or 53% higher than it is today.
How about the upper 1%, was their wealth in 2006 53% higher than it is today? Not at all, it was about the same as today, $14 million, and has been rapidly advancing since 2009 when it was about $11.8 million.
What else do we see?
We see that this is a first. And we see that there was period where the lower 90%’s wealth increased at a faster pace than the upper 1%, or at least maintained its prior gains. That period is 1963 to 1994. Since 1994 the upper 1%’s wealth has gained faster but in the same direction as the lower 90% until 2009.
The chart comes from a report on wealth inequality, Exploding wealth inequality in the United States by Emmanuel Saez & Gabriel Zucman. Emmanuel Saez is a professor of economics and director of the Center for Equitable Growth at the University of California-Berkeley. Gabriel Zucman is an assistant professor of economics at the London School of Economics.
This report correctly put the data together, but then seemed to completely miss the point. They seem to be blinded to the obvious. What could motivate that? This report was written by people from organizations known to be very much in line with the policies of Barack Obama, the Center for Equitable Growth at the University of California-Berkeley and the London School of Economics. In fact UC Berkley and affiliates was the number one Obama donor in 2008. Individuals associated with University of California are the largest group of donors to President Barack Obama’s re-election campaign, according to research by The Center for Responsive Politics. Administrators, faculty, staff and others associated with the UC have donated a total of $1,092,906 to Obama’s campaign, about $300,000 more than individuals from Microsoft Corp. and Google, Inc, the next highest.
What the data shows is that only under the policies of Barack Obama and for every year of his administration, wealth inequality has greatly increased and the upper 1% is rapidly accelerating their wealth growth while the lower 90% are suffering a decline. It is only in the Obama years that the lower 90% has suffered a wealth decline during an official economic boom or recovery.
Why the authors are missing the obvious is the same reason mothers are not allowed to be jurors in the own children’s murder trails. Everyone knows mothers can not be objective about their “baby” being a murderer. Obama is the political and policy “baby” of the organizations that wrote the paper. He more so than any other US President in history in doing things “their way”. He talks more about “wealth inequality” than any other President has. And those policies are producing the opposite of what the authors likely thought would happen. As John Kennedy and other have said “Success has a thousand fathers. Failure is a motherless child.” That is likely why they can not see the obvious.
What we also can see in that chart is that the period of 1963 to 1994 in which the lower 90% did better relatively and wealth inequality fell, was a period of income tax reductions and especially for the upper 1%. John Kennedy cut taxes, he lowered the top marginal tax from 91% to 65%. He proposed it in 1962 and it passed in 1964. Bill Clinton raised the upper tax rate just before 1994.
So the evidence indicates that higher taxes for the “rich” creates more wealth inequality, just looking at it objectively. There is a very good reason that would be the case. It is how people make money. The lower 90% make money generally by jobs, by working for it. A much higher percent of the upper 1% wealth people like George Soros and Warren Buffet do not make their money by working, they make it by investing and trading stocks and through other financial instruments. Not only do Soros and Buffet make their money by investing, or as Soros calls it, “Financial Alchemy”, they tend not to create jobs. They do not have many employees unless they bought the employees as parts of companies they own or own a part of.
This is not true of all of the upper 1%. There are upper 1% people like Steve Jobs and the Koch Brothers that have created many companies and thousands of new jobs from scratch.
So we know what has happened, that wealth inequality has become much worse since 2009 and that the upper 1% and lower 90% are going in the opposite direction for the first time ever in America under Obama’s policies. The next question is how has Obama done this and why?
The answer may shock most. It makes sense when you look at how people make their income and build their wealth. And more shocking is the motives in play in America.
The first thing to remember is that politicians are known for saying one thing and doing another. For saying they have one motive and actually having another motive. This does not mean all politicians, but we should be skeptical until they prove otherwise.
That in mind lets look at what has actually happened since 2009. The jobs market is the worst ever in an official recovery. New records are being set for the lowest labor participation by men ever, and for the whole population since women’s lib increased the percent of women in the workforce. http://www.bloomberg.com/news/2014-05-02/workforce-participation-at-36-year-low-even-as-more-jobs-beckon.html Less that 63% of Americans of working age have jobs.
Does a poor job market, high unemployment and record low labor participation hurt billionaires like George Soros and Warren Buffet? Not really, their wealth is increasing rapidly. It may reduce sales in the economy but it reduces wages a lot more when you have high unemployment over a long period of time. Does a poor jobs market hurt the lower 90%? YES, absolutely. A job is the primary source of income and wealth for the lower 90% and what the wages are for that job have a big impact. Both job availability and wages have done worse under Obama that any President since Franklin Roosevelt.
The mystery of the Obama Exploding Wealth Inequality Effect is explained fairly easily. Since he has become President we have had an economy that favors billionaires over the lower 90%. It is the apparent anti-jobs environment Obama has created. That environment hurts the lower 90% much more than the upper 1% and helps the upper 1% in some ways.
To find the truth you have to be open-minded and objective. Just because Obama says he is in favor of jobs and against wealth inequality does not mean that is what he really wants and we know it is not what he produced. Since he has produced a poor jobs market and created what is called a exploding wealth inequality maybe he has a motive to do that, maybe that was his objective.
Whereas the study authors seem to have missed Obama’s culpability a major Obama supporter in the media, Huffington Post has not missed it. Here is an article by them stating the obvious after reading the report:
President Obama may talk a big game about economic fairness, but his record on the issue doesn’t quite match up.
There are lots of reasons to think so — and we’ll touch on several in just a minute — but the most recent comes from Matt Stoller, blogging at Naked Capitalism, who points us toward a recent bit of number-crunching from Emmanuel Saez, a professor at the University of California, Berkeley.
Saez, who’s known for his work on the income gap, has highlighted a surprising and discouraging fact: during the post-recession period of 2009 and 2010, the rich snagged a greater share of total income growth than they did during the boom years of 2002 to 2007.
In other words, inequality has been even more pronounced under Obama than it was under George W. Bush.
This news may not come as a shock if you’re one of the many Americans who lost their job during the recession and couldn’t find another that paid as well. It also might not surprise you if you’re one of the 46 million people living in poverty — a record number, as it happens — or among the millions of Americans who can get by week to week, but would be ruined by a single financial emergency.
You might likewise not be surprised if you already knew that some household-goods companies are catering to this new reality by quietly neglecting their mid-price product lines, focusing instead on their high-end and budget offerings, since wages are diverging so much. Or if you knew that the U.S. ranks closer to China, Serbia and Rwanda than any other country in the developed world when it comes to income inequality.
On the other hand, if you’ve been listening to Obama decry the wealth gap on the campaign trail, and talk about the need to impose higher tax rates on millionaires, well, then you might be a little surprised. More: http://www.huffingtonpost.com/2012/04/11/income-inequality-obama-bush Since the Huffington Post wrote that article in 2012, Obama’s wealth inequality record has worsened considerably
Next we will look at how Obama created the anti-jobs environment and why. To be continued … In Part 2